Key Points

・The Trump administration has issued termination notices to over 1,500 CFPB staff. This will reduce the agency by nearly 90%.

・A newly released memo outlines a major policy shift that deprioritizes enforcement, supervision, and regulation of nonbank lenders, student loans, medical debt, and fintech firms.

・Experts warn the move may violate court orders and could cripple the agency’s ability to protect consumers from financial fraud.

The Trump administration’s latest action toward the Consumer Financial Protection Bureau could reshape the future of consumer protection in the United States.

Fox Business reported more than 1,500 staff at the CFPB (roughly 90% of the agency) received termination notices Thursday. The move, described as a “reduction in force,” follows a sweeping internal memo outlining a dramatic narrowing of the bureau’s responsibilities and oversight priorities.

Because of this round of terminations, only about 200 employees will remain to carry out the bureau’s duties, which include overseeing banks, investigating financial fraud, and enforcing consumer protection laws. These layoffs come just weeks after federal courts warned against mass terminations at the bureau.

The administration is arguing that all of these critical functions can and should be handled by other agencies or the states.

Change In Policy Direction

An internal document dated April 16, 2025, signed by Chief Legal Officer Mark Paoletta, signals a clear change in direction. The memo outlines new supervision and enforcement priorities aimed at reducing regulatory pressure on financial institutions.

Among the changes:

・Supervisory exams will be cut by 50%.

・Oversight will shift back toward traditional banks, rolling back the agency’s recent emphasis on nonbank financial firms such as fintech lenders and student loan servicers.

・The bureau will focus on “tangible harm” and financial losses that can be measured, rather than what it calls “wrong” consumer choices.

While the memo pays lip service to consumer protection, it instructs CFPB personnel to step back from areas such as peer-to-peer lending, student loan oversight, remittances, and digital payment platforms.

Mortgages will now receive the highest priority, followed by credit reporting violations, contracts and debt issues, and overcharges or fraudulent fees.

Reaction To The Firing

Seth Frotman, a former CFPB general counsel, called the changes reckless. “When students are cheated by scam schools, servicemembers are ripped off by predatory lenders, and our parents are robbed of their retirement savings, Americans will remember that this was Trump’s legacy.”

Critics argue the administration is attempting to dismantle the agency without congressional approval. By gutting the agency to just a few hundred employees, the administration is walking a fine line of not eliminating the agency, which would require legislation.

Paoletta’s memo also explicitly directs the agency to reduce its involvement in state-led investigations and to avoid cases based on what it calls “novel legal theories.” This could limit future enforcement actions tied to emerging financial technologies or new forms of consumer fraud.

Related: CFPB Accuses Capital One Of Deceptive Savings Practices

Consequences

The CFPB was created in the aftermath of the 2008 financial crisis to protect consumers and supervise financial institutions. Since its inception, the agency has returned more than $21 billion to consumers harmed by illegal financial practices.

The staff cuts raise questions about how the agency will continue to fulfill that mission. Acting Director Russ Vought, who also leads the Office of Management and Budget, has not offered a plan for how the agency will operate with just 200 employees.

The latest memo also indicates the CFPB will no longer supervise issues related to “justice-involved individuals” or reentry programs, reducing oversight in areas already under scrutiny by advocacy groups.

Jonathan McKernan, the Trump nominee for permanent CFPB director, has yet to be confirmed by the Senate. Until then, agency leadership is likely to remain in flux.

Robert Farrington

Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page or on his personal site RobertFarrington.com.

He regularly writes about investing, student loan debt, and general personal finance topics geared toward anyone wanting to earn more, get out of debt, and start building wealth for the future.

He has been quoted in major publications, including the New York Times, Wall Street Journal, Washington Post, ABC, NBC, Today, and more. He is also a regular contributor to Forbes.